Definition of Health Insurance Coinsurance

Many health insurance plans contain a provision in which the insurance company shares the cost of coverage with the policyholder. This shared portion is known as coinsurance.

Function

Coinsurance helps the policyholder defray some of the costs of medical insurance after she pays the deductible. The insured and the insurance company each pays for a specified percentage of the cost of a treatment or procedure.

Limits

Coinsurance sometimes continues until the cost of the treatment meets a threshold amount. At that point, the health insurance plan pays the remaining balance.

Example

Suppose you have a medical plan featuring a $200 deductible and 80/20 coinsurance up to $1,000. If you undergo a covered medical procedure that costs $2,500, you are responsible for the $200 deductible plus a coinsurance amount of $160 (20 percent of the remaining $800 up to $1,000) for a total out-of-pocket expense of $360. Your health insurance plan would pay $2,140.

References

• Insurelane: What Is Coinsurance?